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Ensuring employers comply with National Minimum Wage regulations

It is important that the Government ensures
its compliance programme reflects the changing risks within the labour market,
and maintains its progress in ensuring all employers pay the minimum wage.

Since the government began enforcing the
National Minimum Wage in April 1999, HM Revenue & Customs has identified
£68 million in arrears for over 313,000 workers, according to today’s report
from the National Audit Office.

The number of workers identified as being
owed arrears in 2015-16 was 58,000 compared to 26,000 in 2014-15. HMRC has
significantly reduced the average time taken to investigate complaints about
employers’ non-compliance with the National Minimum Wage, but some complainants
(469 or 17% of the caseload) still have to wait over 240 days to get their
cases resolved.

The NAO’s analysis of HMRC’s caseload (as
at December 2015), shows that 72% of open cases are less than 120 days old
compared to 42% in December 2013. The time taken to investigate complaints
varies considerably and depends on a number of factors such as the complexity
of cases and the co-operation of the employer.

Today’s report finds that non-compliance
with the National Minimum Wage in the social care sector remains a concern. The
Low Pay Commission continues to assess this sector as high risk and has
previously reported that up to 10.6% of care workers may not be paid the
National Minimum Wage. The Department for Business, Innovation and Skills (BIS)
re-classified the social care sector as a high priority sector for 2015-16.

There is no accurate overall measure of
non-compliance with the National Minimum Wage regulations and, as a result, it
has been difficult to assess the effectiveness of HMRC enforcement activities
over time. The government has increased the resources available for compliance
and enforcement with the National Minimum Wage.

The NAO finds that the number of referrals
passed to HMRC from the helpline has reduced significantly in the year ending
December 2015 from 2,327 in 2015 to 1,340 in 2015. In April 2015, BIS changed
the operator of the helpline and is now assessing how this change, and other
factors, have affected the number of calls.

Both BIS and HMRC have strengthened the
sanctions which they are able to apply to non-compliant employers. Since
October 2014, BIS has regularly named and shamed non-compliant employers.

Between October 2013 and February 2016, it
has published the details of 490 employers who failed to pay their workers the
National Minimum Wage. Between 2009-10 and 2015-16, HMRC has imposed penalties
of nearly £5.6 million on non-compliant employers, and has prosecuted nine
employers who fit the criteria set by BIS.